U.S. Manufacturing Resurgent, Advocate Says

Scott Paul talks to people around the country about the challenges manufacturing faces where they live. “Everybody thinks they have a unique circumstance,” said Paul, president of the Washington, D.C.-based Alliance for American Manufacturing.

The reality he finds is that the issues are similar, like companies struggling to find skilled workers to fill job openings.

The AAM, a group founded in 2007 by labor and business, aims to bolster U.S.-based manufacturing. Paul, a 46-year-old Indiana native, visited Buffalo for a town hall-style meeting last week, and discussed in an interview why he believes U.S. manufacturing is strengthening:

Q: You say you are optimistic about U.S. manufacturing. For what reasons?

A: There are a number of things, in no particular order. One is the strength of the auto industry, which is in better shape than we’ve seen in a long time. Even if there are not as many assembly plants in Western New York as there are in the Detroit area, there’s a huge auto supply chain here, and that stands to benefit from a strong Detroit Three. … I think the other thing is energy costs. For energy-intensive manufacturing – and most manufacturing is energy intensive – energy used to be quite a burden. Now, with the onset of abundant domestic natural gas, that dynamic has changed considerably. Now our producers are at a cost advantage compared to most producers around the world, whether you’re working in Asia, South America or Europe. Since energy can be anywhere – particularly in energy-intensive industries – up to 30 percent of the cost of production, that makes a huge difference, it makes them much more competitive.

Number three is this broader idea of “reshoring.” There’s certainly an element of (public relations) to it. People like the Made in America store [in Elma], and companies now go out of their way to advertise their products are made in America because they understand that’s what consumers want, or is at least one of the factors they are willing to consider. The other [influence], from kind of a best-practices management perspective, is that offshoring got oversold. I think a lot of companies looked at it very narrowly through the prism of cheap labor, and they didn’t realize that there are other costs associated with that. … Just in terms of employment, for a couple of decades, the help-wanted ads in manufacturing were pretty slim. The work force, as a result, is aging in manufacturing. … So there will be in manufacturing, for the first time in a generation, a fair number of new job openings.

Q: What is your perception of manufacturing in the Buffalo Niagara region?

A: The thing that gives me optimism about this region is, there is a pretty large concentration of auto suppliers here in the supply chain, and that industry has been pretty strong. There’s a great workforce here, and when you add in energy costs and other things, it’s a very competitive region. We do a lot of trade with Canada. … You’re not going to have a steel mill running with 15,000 people. That’s just not the nature of manufacturing anymore, but that’s not a reason to be pessimistic about it. I think in the future we can add manufacturing jobs here and we can do it for a fairly lengthy clip. I do think we need the right public policies.

Q: Your group claims currency manipulation by China is major problem. How would you solve that?

A: The (Currency Reform for Fair Trade Act) would give businesses more tools in trade cases to fight against currency manipulation. So if they file a trade case against subsidized or dumped imports from China or any other country that’s manipulating its currency, the penalty could also include the estimated difference of that currency manipulation. So it would basically jack up the penalties. It doesn’t ban all Chinese goods, it doesn’t place a tariff on all Chinese goods. But it does serve as a deterrent to the Chinese who are doing this, because their manufacturers could face very steep costs trying to export their products to the U.S. if there are trade cases filed here.

The other thing we would like is the Treasury Department to actually cite China as a currency manipulator. … There’s a report that’s required two times a year. The next report is due (Monday). I’m not optimistic that Secretary [Jacob] Lew will be any more willing than Secretary [Timothy] Geithner was to cite China as a currency manipulator. But I think it’s an essential step, I think you have to be honest about it. … The one thing we know is the Chinese respond to pressure, even though they say they don’t.

Q: Who belongs to your group?

A: We were set up through the Steelworkers [union] and some of their employers, but we don’t serve as functionaries for any specific companies or even the Steelworkers. Our mission is to go out there and find common solutions on public policy to some of the challenges facing manufacturing, educate the American people about manufacturing, and get Washington talking about it and get Washington doing something about it. … A core competency of the U.S. is manufacturing and it has been for a very long time. But we have not had in place public policies to support manufacturing and for production and hiring in the United States for a generation, and it shows. Our trade policy has been about opening markets, but it hasn’t been so much about trade enforcement and helping our guys who are still here to compete against subsidized imports.

Our educational policy is very much geared toward four-year college degrees, toward opportunities in emerging sectors like health care. … Our tax policy, the same way. You get a great rate if you’re a hedge fund investor, but finding incentives for long-term patient capital, which is what you need in manufacturing, is much more difficult. You’ve faced a kind of public policy environment that has basically begged you to move your factory overseas. I think rhetorically that’s shifted now. Everyone’s professing their love for American manufacturing.